Chapter 20
INTERNAL REVENUE STAMPS
Mr. James S. Hord, who had drafted an Internal Revenue Law for Porto Rico in 1901, was employed as an expert to draft the Philippine Internal Revenue Law of 1904. He became the first Collector of Internal Revenue under the new law. In January 1907, the John Hopkins Press (Baltimore) published a pamphlet by Mr. Hord, entitled “Internal Taxation in the Philippines.” In this pamphlet Mr. Hord described the method of using INTERNAL REVENUE stamps prescribed by the Internal Revenue Law of 1904, as follows:
 
“The administrative machinery, provided for the collection of all various taxes and for the prevention of frauds, is similar in all essentials to the system installed in Porto Rico in 1901 for the enforcement of the internal revenue law of that Island….”

“Internal revenue stamps of thirteen denominative values, pesos and centavos are serially numbered, at each end, in the Bureau of Internal Revenue and issued to the assessor and collector for the city of Manila and top the forty provincial treasurers and, by them, to their six hundred deputies for sale to the taxpayers, for use in the payment of taxes. Persons subject to license taxes purchase stamps quarterly and affix them in one of four blank spaces provided on the face of each license; at the end of the year all used licenses with the stamps attached are surrendered to the internal revenue officers and returned to the Bureau of Internal Revenue for audit and file. Manufacturers of cigars, cigarettes, liquors and other objects subject to tax, fill in and send along with each shipment of goods an official invoice sheet to which stamps, in payment of the tax on the goods described in the invoice, have been affixed and cancelled. The stamps are so affixed to threes invoices that when the invoice is removed from its stub, which remain in the possession of the manufacturer, one half of each stamp remains attached to the stub and the other half goes forwards, attached to the invoice, to be delivered together with the goods to the consignee. Each package of goods is branded with the assessment number of the manufacturer and the number of the official invoice which accompanies it in transit. By these means it is possible for the manufacturer, the carrier of the goods and the person to whom they are consigned to prove at any time, by the production of either the stamped invoice or stamped stub, that the taxes on any particular shipment of goods have been paid for.”

“Merchants and other persons receiving goods subject to tax are required to keep the stamped invoices they receive from the manufacturers until called for by the internal revenue agents, deputy provincial treasurers or their assistants. All internal revenue officers are required to supervise the operations of manufacturers in their respective districts, to check the goods in transit and in the possession of merchants and others at the time they gather up the stamped invoices. All stamped invoice sheets are returned to the Bureau of Internal Revenue for audit and file. Every taxpayer, whether merchant, manufacturer, gatherer of forest products, etc…is given a distinctive assessment number and it known officially by that number. The serial number of each stamp purchased by the taxpayer is credited to his assessment number, and he is allowed to use only the stamps so purchased and no others. When the stamped licenses and invoices, having served their purpose, are returned to he Bureau of Internal Revenue for file, the serial numbers of the various stamps are checked against the assessment numbers of the taxpayers using them for the payment of taxes. By this means the re-use of stamps is effectively prevented, inasmuch as stamps once used are cancelled, cut in two, and both portions removed from the possession of persons who might otherwise be tempted to re-use them. As will be seen, this system also makes it impossible for counterfeit stamps to go undetected. If an unnumbered stamp is used in the payment of a tax it is in itself an evidence of fraud. If the counterfeiter puts a serial number on the spurious stamps issued by him such numbers will either be duplicates of official serial numbers already placed in the Bureau of Internal Revenue stamps already issued, or the numbers on the spurious stamps will be higher than the numbers yet reached in the official record.”

“The question as to whether the United States system of affixing stamps to boxes of cigars, packages of cigarettes, bottles and demijohns of liquors, etc., should be adopted in the Philippine Islands are carefully considered, and it was decided that such a system was not locally applicable”

It is evident from the above statement that subsequent to January 1, 1905, there were two distinct methods of using INTERNAL REVENUE stamps. Entire used stamps occurred in he annual licenses issued to merchants, manufacturers and those engage in the practice of certain professions; “split” stamps occurred on the official invoices covering the sale of cigars, cigarettes, liquors, and other goods which were subject to specific internal revenue taxes. Both methods of using INTERNAL REVENUE stamps were continued until about the end of 1933. But since the end of 1933, INTERNAL REVENUE stamps have been used only as “splits.” By a curious reversal of procedures, the licenses of which entire stamps were originally used eventually (since January 1, 1919) came to bear “split” INTERNAL REVENUE stamps, while the official invoices covering the sale of distilled liquors, on which “split” internal revenue stamps were originally used, eventually (from March 15, 1916, until about the end of 1933) came to bear entire internal revenue stamps.

It is evident from the above statement that subsequent to January 1, 1905, there were two distinct methods of using INTERNAL REVENUE stamps. Entire used stamps occurred in he annual licenses issued to merchants, manufacturers and those engage in the practice of certain professions; “split” stamps occurred on the official invoices covering the sale of cigars, cigarettes, liquors, and other goods which were subject to specific internal revenue taxes. Both methods of using INTERNAL REVENUE stamps were continued until about the end of 1933. But since the end of 1933, INTERNAL REVENUE stamps have been used only as “splits.” By a curious reversal of procedures, the licenses of which entire stamps were originally used eventually (since January 1, 1919) came to bear “split” INTERNAL REVENUE stamps, while the official invoices covering the sale of distilled liquors, on which “split” internal revenue stamps were originally used, eventually (from March 15, 1916, until about the end of 1933) came to bear entire internal revenue stamps.